Coinbase under fire for failing to support new version of bitcoin

August 1, 2017 - 10:44 AMT

PanARMENIAN.Net - The world's most popular digital currency exchange, Coinbase, is under fire from angry customers over its decision not to support a new version of bitcoin that could also make it vulnerable to "ruinous legal trouble," Fortune cited a prominent legal scholar as saying.

Coinbase's headaches are tied to a breakaway faction of bitcoin miners, who are responsible both for generating new coins and for the software called blockchain that is used to record transactions. On Tuesday, August 1, the miners will implement a software update that will create a so-called "fork" and result in two versions of the bitcoin blockchain—and two forms of the currency as well.

The creation of the new currency means every existing bitcoin holder is entitled to an equal amount of what the breakaway miners call "Bitcoin Cash". Coinbase's decision against supporting the new version, however, means its customers will not receive this benefit.

This is significant because the new Bitcoin Cash is expected to be worth real money. As of July 31, futures markets predict a unit of the new currency will be worth hundreds of dollars.

This has led customers to post angry messages on Coinbase message boards, accusing the company of stealing their property and threatening class action lawsuits.

Such a lawsuit may not be far-fetched, according to Tim Wu, a prominent legal scholar who writes extensively about technology. In a series of tweets, he likened Coinbase's decision to a broker withholding shares from its customers.

In an email to Fortune, Wu added that common law property rules mean that the newly issued Bitcoin Cash belongs to the Coinbase customers in the same way a newborn calf belongs to the owner of a cow.

All of the controversy over the August 1 fork, however, appears to have done little to spook crypto-currency. As of Monday evening, bitcoin prices were around $2,850, not far from its all-time high of just over $3,000.